Govt urged to respond to France’s palm oil tax plan

The local palm oil industry has demanded that the government lodge a formal protest with France following the French Senate’s approval on a measure that will quadruple import tax on palm oil, a key ingredient in its food industry.

French lawmakers reportedly passed the measure last week, which will raise the existing tax of €100 (US$127) per ton of palm oil to €400 per ton, to encourage food manufacturers to choose healthier alternatives as substitutes for the oil, which is widely used to make Europe’s favorite chocolate hazelnut spread, Nutella, as well as margarines, cooking oil and snacks, such as cookies, cakes and potato chips.

The government should also talk at the earliest opportunity with French representatives in Indonesia to give them a comprehensive understanding about the local palm oil industry, Indonesian Palm Oil Producers Association (Gapki) executive director Fadhil Hasan said.

“France is one of the most influential countries in the European Union (EU), which is the third-largest market for our palm oil exports after India and China. Although our exports to France are relatively low, this new measure could serve as a precedent for other EU nations and, thus, hamper our market potential in the region,” Fadhil told The Jakarta Post on Sunday.

The government should not begin negotiations on the Comprehensive Economic Partnership Agreement (CEPA) with the 27-member bloc before this issue was resolved, according to Fadhil.

Indonesia was slated to launch a round of negotiations to discuss the partnership with the EU in December, Trade Minister Gita Wirjawan said earlier this month.

The French lawmakers’ plan to push up the tax on palm oil by 300 percent was proposed by the Senate’s social affairs committee earlier this month as an amendment to France’s 2013 social-security budget legislation.

Bloomberg reported that according to its initiator, French Senator Yves Daudigny, the tax hike, referred to as the “Nutella tax” by the media, aimed to “fight obesity and cardiovascular disorders”. Apart from the claims that palm oil is detrimental to health due to its high levels of saturated fat, detractors also cite allegations that the palm oil industry has contributed to deforestation on a massive scale due to the expansion of oil palm plantations.

The tax increase would be applied not only to palm oil but also “some other vegetable oils”, according to a report by the Associated Press (AP). The AP report did not, however, specify the vegetable oils.

The Lower House of the French Parliament has to vote on the proposed law next month, and the amendment to the tax will likely be included in the session.

Fadhil said that both claims, namely that palm oil was a health threat and a cause of deforestation, were false and could not be used as justifications for the tax hike. He added that health claims, for example, had been used in a US anti-palm oil campaign in the 1980s, but had failed due to a lack of scientific supporting evidence.

“The environmental claim also ignores the fact that Indonesia’s palm oil industry has tried to address the issue of sustainability in its production,” he said.

In response to the threatened tax increase, the Trade Ministry’s director general for foreign trade, Deddy Saleh, said the government would raise their concerns over the matter. Trade Minister Gita Wirjawan planned to meet with his French counterpart to discuss the issue, he said.

“We will first study the conditions and the reasons why the French government want to apply the plan and decide an appropriate response to address this,” Deddy said on Sunday.

According to Deddy, it was possible for Indonesia, the world’s largest palm oil producer, to bring the case to the Dispute Settlement Body at the World Trade Organization (WTO) if and when the tax hike was implemented.